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India, How Can You Fight Unemployment When You Don't Know If It Exists?

In India, the national jobless rate simply doesn't get calculated...
In India, the national jobless rate simply doesn't get calculated...
Patrick de Jacquelot

NEW DELHI - It is not hard to imagine how the French government (or their counterparts in Athens or Washington) would dream of such a thing: escaping the monthly stress of publishing unemployment figures.

In India, the national jobless rate simply doesn't get calculated, and the topic is virtually absent from media and political debate.

If you look hard enough, though, it is possible to find an official unemployment rate, calculated... every five years, based on the collection of statistics from the National Sample Survey. The latest data go back to the period between July 2009 and June 2010, and states unemployment is only 3%. A figure so small that economists tend to disregard it completely.

The absence of data on such an essential component of economics is explained by several factors. “Historically, no effort has been made to collect this information because it was thought that agriculture would absorb all the work force,” explains Rajat Kathuria director and chief executive of the economic think tank Icrier.

Secondly, in emerging economies the notions of employment and unemployment can be blurred. “When there is a vast informal economy, unemployment is not a very relevant criterion,” Deputy Chairman of India's Planning Commission Montek Singh Ahluwalia said in a recent conference. “Someone can keep working on his farm or in his shop, while earnings have collapsed.”

An idea expressed a bit differently by the economist Rajiv Kumar, the former Secretary General of the Federation of Indian Chambers of Commerce and Industry (FICCI): “There is an old joke: in India, no one has enough income revenue to afford unemployment!”

In the absence of any compensation, when you have to feed your family, there is always an occasional job -- however petty -- you can find. So, sheer idleness is actually quite rare.

Finally, the third reason: the complexity of data collecting in an immense country of 1.2 billion people.

Nevertheless, the unavailability of a reliable measure of employment is “a shame for economists, I plead guilty!” admits Rajiv Kumar, for whom this absence is even more tragic as employment “is the biggest problem we have to face!”

Making and killing jobs

Reality on the ground is indeed very far from full employment. The actual problem, affirms Denis Medvedev, economist at the World Bank in Delhi, “is that underemployment is very high: do people work sufficient hours? Do they earn sufficient wages?”

Anecdotally, the spectre of real widespread unemployment is very real: one economist hints at countless men sitting, doing nothing in the streets of towns and villages across the country; another suggests that training institutes in the provinces hire university graduates as teachers for 4,000 rupees a month ($73) because these youths can find nothing else. Last month, when SBI -- the nation's biggest bank -- set out to recruit 1,500 employees, some 1.7 million applications arrived.

There might not be unemployment figures, yet job creation figures are worrying indeed. A study from the think tank Institute of Applied Manpower Research asserts that, after creating 60 million jobs between 2000 and 2005, the Indian economy did not create more than 2.8 million between 2005 and 2010. Underlining the fact that the fall of the agriculture work force (normal for India's development stage) has been entirely absorbed by the construction sector -- unskilled and seasonal jobs --, the Institute considers however that industry destroyed 5 million jobs between 2005 and 2010, after creating 12 million the five previous years.

The dramatic nature of these figures leads some economists to doubt their accuracy, but not the reality of the trend. The economic survey set by the Ministry of Finance deplores that too many profitable companies prefer using temporary workers or machines, rather than skilled workers, for long term jobs.

Indeed, large enterprises keep increasing the part of interim workers, free of social benefits, as opposed to fully entitled employees. As a result: 93% of Indian workers do so in an “informal” way, that is to say, without health insurance, retirement pensions or other basic benefits.

This could partly be explained by labor practices that are extremely benificial for those who are lucky to have permanent status: for example, no enterprise employing more than 100 people can lay off people without government approval, which is nearly impossible to obtain.

Many experts in India estimate that the real rate of unemployment may be around 20%. Yet, the Indian population keeps increasing, and 10 to 12 million jobs should be created each year -- one million a month.

But what if India cannot do it? “It is often said that Indians are satisfied with little, but it is a romantic vision,” states Rajat Kathuria. “Expectations are as great here as elsewhere. I'm scared of what could happen.”

One more reminder of the risks of trying to prevent a rising fever without a thermometer.

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